money supply, banking & financial institutions section 9 MCQ Questions & Answers Detailed Explanation
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The following question based on Money Supply, Banking and Financial Institutions topic of indian economy mcq
- ATMs set up, owned and operated by non-banks are called WLAs
- Non-bank ATM operators are authorized under the Payment and Settlement Systems Act, 2007 by RBI.
(a) (ii) only
(b) Both (i) & (ii)
(c) (i) only
(d) Neither (i) nor (ii)
The correct answers to the above question in:
Answer: (b)
ATMs set up, owned and operated by non-banks are called WLAs. Non-bank ATM operators are authorised under the Payment & Settlement Systems Act, 2007 by the Reserve Bank of India (RBI).
The rationale to allow non-bank entities to set up WLAs has been to increase the geographical spread of ATMs for increased/enhanced customer service, especially in semi-urban / rural areas.
In case of Brown Label ATMs, the service providers own the hardware of the ATM machines. The responsibility of identifying ATM site, lease agreement with the landlord, power supply to ATM kiosk lies with the service provider.
Thus, the service provider takes the responsibility of maintenance of the ATM whereas the sponsor bank takes the responsibility of cash management and provide connectivity to ATM to the banking network.
Logo of sponsor bank is displayed on brown label ATM kiosk premises. Brown Label ATMs are the most cost-effective solution for banks. Unlike Brown Label ATMs, White Label ATMs will not display the logo of any bank like SBI, CANARA BANK, PNB ETC.
Logo of White Label ATM operator like Tata Indicash, Muthoot Finance etc.
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Read more money and supply banking financial institutions Based Indian Economy Questions and Answers
Question : 1
The one rupee Indian note bears the signature of
a) Secretary, Ministry of Finance
b) None of the above
c) Finance Minister
d) Governor, Reserve Bank of India
Answer »Answer: (a)
Question : 2
RBI intervenes in the foreign exchange market to:
- To contain the volatility in the rupee
- To set a price band for Rupee in terms of Dollar
a) (ii) only
b) Both (i) & (ii)
c) (i) only
d) Neither (i) nor (ii)
Answer »Answer: (c)
RBI intervenes in the forex market to contain volatility in the exchange rate of the Rupee with respect to the dollar. There is no targeted band in which RBI tries to keep the Rupee-Dollar exchange rate.
For example, if the Rupee starts depreciating slowly over a period of time and it moves to $1 = Rs 85, then RBI may not intervene in the forex market.
Question : 3
Which of the following groups suffer the most from inflation?
a) Business class
b) Holders of real assets
c) Debtros
d) Creditors
Answer »Answer: (d)
Inflation, or the general rise of price levels in an economy, has many deleterious effects. It leaves the economy as a whole poorer relative to pre-inflation levels of wealth (individual and societal).
Inflation reduces the value of each unit of currency and thus leaves the holder of that currency with lower purchasing power.
Generally speaking, those who benefit from higher inflation are debtors and those who suffer from it- creditors. If one has substantial debt, each dollar one has to repay would be worth less than when it was borrowed.
In this way, one pays back less in real terms than one had borrowed. Those who may benefit from higher inflation are people with significant debt.
Question : 4
‘Residex’ is associated with
a) Mutual fund prices
b) Land prices
c) Share prices
d) Price inflation
Answer »Answer: (b)
The RESIDEX was first launched in 2007 by the National Housing Bank (NHB) to provide an index of residential prices in India across cities and over time. It is the first housing price index in India.
It was launched in order to fill the price information gap and to streamline the process of development of property in various cities across the country.
Question : 5
Which one of the following statements is correct ?
a) Good and bad money cannot circulate together
b) Cannot say
c) Good money drives bad money out of circulation
d) Bad money drives good money out of circulation
Answer »Answer: (d)
One of the most famous axioms in economics is “bad money drives out good.” This rule has generally been attributed to Sir Thomas Gresham (1519–1579), an English financier who advised King Edward VI and Queen Elizabeth I with regard to financial matters, and it is popularly known as Gresham’s Law.
The key prerequisite is that there must be two forms of money or currency (with the same face value) in circulation simultaneously.
The acceptance of both currencies at the same face value is required by legal tender laws enacted by the government. One of the currencies is artificially overvalued, and the other currency is artificially undervalued.
In such situations, the bad money (the artificially overvalued one) tends to drive the good money (the artificially undervalued one) out of circulation. In other words, people spend the bad money and hoard the good money.
Question : 6
Which of the following grants/ grant direct credit assistance to rural households?
- Regional Rural Banks
- National Bank for Agriculture and Rural Development
- Land Development Banks
a) Only 2
b) All of these
c) 1 and 3
d) 1 and 2
Answer »Answer: (c)
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